Market

Rakesh Kumar

15 Sep, 2023

A market is a structured environment, either physical or virtual, where buyers and sellers convene to trade goods and services. This trading hub operates based on the principles of supply and demand which dictate the value of the goods and services exchanged. Markets are versatile, existing in various forms including online platforms and traditional physical settings, and can host transactions for a wide range of tradeable items, from commodities to financial instruments. It is a cornerstone in the facilitation of economic transactions in society.

What is Market?

According to the Oxford Dictionary definition, ‘an occasion when people buy and sell goods; the open area or building where they meet to do this’. Usually, it is a place where both the seller and buyers get together to perform the exchange process of goods and services. A physical market, like-wise a retail outlet, where parties can be each in case of the physical market while no gathering of parties is important to carry out the exchange process of goods and services. This can be done through online platforms virtually. 

One can easily define a Market where both the buyers and sellers are compatibly present along with goods and services that may further be purchased or sold out accordingly. 

Key Points

• A Suitable area where both buyers and sellers can reach out to perform the exchange or transactions related to goods and services.
• The market may be physical or virtual form to complete the transactions.
• The value of goods and services depends upon market forces like demand and supply.
• The availability of buyers and sellers with goods and services is the basic foundation of any market.
• Existing markets are of different types, such as illegal and legal ones.

Understanding Market

• As per Economics, an arrangement or collaboration of systems, institutions, procedures, social relations or infrastructures where parties meet together for exchange.
•    In the market, parties can be pleased to exchange their goods and services by using the barter system; meanwhile, in different markets, sellers offer their goods and services in terms of labour power to buyers. In exchange, they take money.
• A market is an established place as it fixes the prices of goods and services offered between parties.
• It provides a suitable place where both parties can easily be a part of the exchange system and can do trade and easily distribute and allocate resources within society.
• The market provides the facility for any type of tradeable items or goods for its evaluation and pricing.
• A market is generally created with a purpose or intention by human interaction so as to enable the exchange of rights for (ownership) of specific goods and services.

How Market Functions’

• Generally, a market can be titled as a place where interested parties can make contact with each other to perform economic transactions without getting involved in any type of legal tender.
• Market transactions cover goods, services, any information about products or services, the exchange of currencies, or any type of union that usually passes from one person to another person. Simply, it means that a market is a place where buyers and sellers can easily meet and interact with each other, etc.
• In order to complete any trade, only two people are required. In this case, the involvement of a third person may introduce the competition in the market and will balance it accordingly. For active buyers and sellers, the market offers a suitable place for competition on goods and services, which can be further identified on the basis of their numbers.
• Market decisions are generally taken under an economic arrangement in order to shape/create the market formally known as the market economy. Within such a system, various factors like the production of items, distribution and pricing of goods and services are generally controlled on the basis of demand and supply in the market.

Indian Stock Market Fact

SEBI (Securities and Exchange Board of India) is a statutory body that regulates the stock, bond, and currency markets in India. It monitors, regulates & improves the capital market of India in terms of issuing securities, protecting the investor’s interest & providing financial mediators. It creates regulations and several provisions to prevent fraud and make sure that traders and investors have the correct information to make the most informed decisions possible.

Demand and Supply in Market

• Under Economics, the prices of goods and services basically depend on supply and demand. The term supply and demand is one of the basics in economics as the sellers create supply, and demand is generated by buyers. However, the market tries to find a balance in the prices of goods and services at a time when both demand and supply are balanced in nature. Meanwhile, such balances can be disturbed by market factors such as income, technology, and manufacturing costs on products and based on the numbers of buyers and sellers actually participating in the market.
• In a broader sense, it depends on the basis of the quantity of goods and services available in the market, what consumers demand and how much they are eager to purchase. Usually, when there is more demand for goods and services in the market by buyers, then sellers use to increase their production. When demand decreases, the sellers drop the prices of goods and services within the market.

Physical and Virtual Markets

• Markets may have their physical as well as virtual locations where economic transactions can be made possible. Markets have their physical locations, like retail stores and a few other businesses that support individual goods to sell or the wholesale markets for selling goods and services to distributors.
• It can be a virtual market where technology provides facilities to internet stores like Flipkart and Amazon platforms where transactions can be made online, and there is no need for face-to-face interactions. 

Characteristics of a Market

Some characteristics are usually needed to define a market and help in its smooth functioning. Some are listed below-

• Arena: A recognized and well-established stage/platform where buyers and sellers can easily perform the basic economic transactions related to the exchange of goods and services. To perform this function, it does not require any physical location.
• Buyers and Sellers: The smooth functioning of any market needs a buyer with a seller so that products or services can be easily sold out and purchased accordingly. In case no one is buying any products or services from anyone, then the market will not exist.
• Commodity: At least an item is important in a market where a person can easily buy, and the seller can easily sell the product. Suppose rice is a commodity and must be available in the rice market, which can be either sold out or purchased for the existence of the rice market.   

Types of Markets

A market is a suitable area where both buyers and sellers can reach out to perform the exchange or transactions related to goods and services. Markets may have their physical as well as virtual locations where economic transactions can be made possible. Markets have their physical locations, like retail stores and a few other businesses that support individual goods to sell or the wholesale markets for selling goods and services to distributors. Markets are created for different reasons, such as the types of products to sell out, their physical locations, their size, etc.

Underground Market

• Such markets are widely known as black markets or illegal ones, having no permission from the concerned government authorities to establish.
• The transactions within such a market are generally performed without the knowledge of government authorities. These markets came into existence in order to save tax on the purchase and sale of goods and services. So, the buyers and sellers within the market choose cash transactions beyond traceable by government authorities.

Auction Market

• Such markets provide the facility for buyers and sellers to start bidding on any goods and services.
•  Usually, the products delivered to those buyers have the top bidding prices. Auction site examples include eBay, eBid, Sotheby’s, Copart, Auction.com, and GSA Auctions.

Financial Market

• Such markets offer securities, currencies, bonds, etc., where interested parties can easily trade according to their need and requirements.
• It can be a virtual or physical type of market that offers information regarding the liquidation and capital knowledge of any business.

Government Regulated Markets

• Except for the above-said markets, the rest of all markets come under the category of regulating markets.
• The government itself has created and granted permission for their existence where a buyer and seller can easily get together and make transactions under economics.